Smith: Texas ends an era of business pragmatism

Texas’ bizarre new abortion law has thrown the country into an uproar. The new law is part of a larger pattern of state leaders valuing culture wars over pragmatism, and it’s prompting people to ask whether the state’s harsh new regime will deter businesses from setting up shop there. That’s unlikely in the near term, but in the long run it could indeed threaten Texas’ long-standing reputation as a great place to do business.

Texas has been known as an economic powerhouse for decades. It has cheap land, no state income or capital gains taxes, and business-friendly regulatory policies that have made it a mecca for those looking to escape the pricey, cramped megalopolises of the coast. This was magnified by generations of pragmatic leaders who invested in education, encouraged the development of wind power to diversify the energy sector and strove to build up the state’s technology industries. Even culturally, Texas seemed to have it all — diverse, vibrant, relatively safe big cities and a deep-red countryside for those of a more conservative inclination. No wonder Texas outstripped its sclerotic rival California in terms of population growth for 20 years.

But there’s no guarantee that trend will continue. Under Gov. Greg Abbott, Texas has made some course changes that could eventually put the vaunted “Texas model” under threat.

The recent abortion law is just been the most visible of these. The law has gained national attention because of a U.S. Supreme Court decision in its favor, which threatens to relitigate the constitutionality of abortion itself, as well as raising various other thorny legal issues. But the law is pretty wild in its own right — it allows citizens to personally earn money by suing people who get, perform or assist abortions, effectively turning the entire population of the state into bounty hunters.

That’s a chilling prospect for many people who might be considering a move to Texas for business. Who wants to have to worry about the possibility of their daughter being watched by greedy vigilantes? A law that provides a financial incentive for neighbors to spy on neighbors is hardly the action of a state that welcomes working families.

But the abortion law is only one of several instances in which Abbott and his political allies have put culture wars above economic pragmatism in recent years. When a blizzard cut off electricity to most of the state in February, Abbott was quick to blame wind turbines for the outage. This is nonsense, of course; wind accounts for about a quarter of the state’s electricity generation, but was responsible for only 13% of the outages.

Turning energy into a culture war might play well with Fox News hosts, but economically it’s a terrible move. Solar and wind — two things Texas has a lot of — are already cheap and getting even cheaper, meaning that if Texas wants to be competitive, it’s going to have to diversify away from an increasingly obsolescent oil and natural gas sector. This is especially important in order to attract businesses like that of Elon Musk, who has recently invested a lot in Texas and whose companies constitute big bets on renewable energy. Former Gov. Rick Perry, for all his support of fossil fuels, understood the need for pragmatism on energy; Abbott doesn’t seem to.

Immigration is another example. A formerly pro-immigrant lawyer, Abbott has reinvented himself as a scourge of the undocumented and declared that the state won’t participate in refugee resettlement. These actions by themselves won’t necessarily cut Texas off from the human capital it needs to power its economy — refugees provide only a modest economic boon and won't make or break the state’s economy. But sending a general message that Texas is unwelcoming to foreigners could warn skilled workers away from cities like Houston and Dallas. And Texas definitely needs those skilled workers if it’s going to be a tech leader.

There’s also public health. Even as COVID-19’s delta variant swept through his state, Abbott banned many businesses from requiring proof of vaccination. The move might play well with anti-vaccination elements in the GOP base, but it sends a strong message that the state’s leadership is cavalier about the lives of its people. Many Texans will undoubtedly die from lack of vaccination; by banning vaccine mandates, it’s willfully contributing to that calamity, as well as directly interfering in the affairs of businesses.

These examples of partisan pandering aren't going to instantly crash Texas’ economy. But over time they will contribute to a general sense that Texas’ politics has exited its long era of pragmatism and entered a period of dysfunctional culture wars. That will turn away both business investment and human capital that the state needs if it wants to sustain its outperformance and growth over the next few decades. Texas’ leaders don’t need to become liberals, but they should return to the pragmatism that characterized the state’s approach in earlier times.

Noah Smith is a columnist for Bloomberg Opinion.

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